Trusts slide as markets remain in doldrums
AUSTRALIA’S listed property stocks fell 5.6 per cent in February, lagging the broader share market ( by 4.9 per cent) for the sixth consecutive month. Listed property trusts have trailed the broader market over three- month ( down 10.6 per cent), six- month ( down 18.9 per cent), one- year ( down 26.4 per cent), fiveyear ( down 9.2 per cent) and 10- year ( down 2.5 per cent) periods.
Its was a difficult month again, with the reporting season doing nothing to improve investors’ confidence.
A number of trusts reduced or cut distributions forecasts, including Macquarie CountryWide, GPT, APN European Retail trust, Allco’s Record Realty and all three Rubicon vehicles ( Rubicon America, Rubicon Japan and Rubicon Europe).
More broadly, global equities struggled to make any headway, weighed down by renewed fears about the health of the US economy following a string of weak data, starting with the worst non- manufacturing Institute for Supply Management reading in more than six years. In domestic economic news, the Reserve Bank lifted the cash rate 25 basis points to 7 per cent at its meeting in early March.
This was widely expected, with the bank noting that a ‘‘ significant slowing in demand from its recent pace is likely to be necessary’’ to contain inflation.
The bank had already raised rates in February and, after the March statement, the market priced in the increasing likelihood of more interest rate rises to come.
An increase in interest rates will clearly put more pressure on home prices ( particularly in western Sydney suburbs) which will put further undermine the new home building sector.
Housing supply is tipped to remain well below underlying demand in the near term.
Countering this is the continued increase in rents, which may attract investors back into the residential market.
Interstate migration is also set to slow as the sharp price appreciation in Perth and Brisbane has meant that most Australian cities are now equally unaffordable.
On the currency, the Australian dollar skyrocketed in January to US94c on rising interest rate differentials relative to the US.